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The Citigroup Clique

Why is Obama appointing so many former employees of one Wall St. bank?

By SEN. ELIZABETH WARREN

April 29, 2014

Today, I cast my vote on the Senate Banking Committee for Stanley Fischer to serve in the No. 2 position at the U.S. Federal Reserve. I asked Fischer tough questions – in person, at his nomination hearing, and in writing – and I have been impressed with the depth of his knowledge and experience.

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But I cast my vote reluctantly because of my growing frustration over the concentration of people with ties to the megabank Citigroup in senior government positions.

In recent years, Wall Street institutions have exerted extraordinary influence in Washington’s corridors of power, but Citi has risen above the others in exercising a tight grip over the Democratic Party’s economic policymaking apparatus. Fischer, after all, is just the latest Citi alumnus to be tapped for a high-level government position. Starting with Robert Rubin – a former Citi CEO – three of the last four Treasury secretaries under Democratic presidents have had Citigroup affiliations before or after their Treasury service. (The fourth was offered, but declined, Citigroup’s CEO position.) Directors of the National Economic Council and Office of Management and Budget, as well as our current U.S. trade representative, also have had strong ties to Citigroup.

No one doubts that there are smart, hard-working people at Citigroup and elsewhere in the financial industry. When I worked to set up the new Consumer Financial Protection Bureau, I interviewed, hired and worked alongside many people with private-sector experience. Private-sector experience can be valuable and should not disqualify someone from serving in the upper levels of government.

But there is danger anytime the key economic positions in our government fall under the control of a single tight-knit group. Old ideas can stay around long after they’re useful, and new ideas don’t get a fair hearing. We learned about the harms of groupthink in economic policymaking the hard way – first with the deregulation of the banking industry in the 1980s and 1990s, followed by the no-strings-attached bank bailouts in the aftermath of the 2008 financial crisis, and most recently with the anemic efforts to help homeowners who were systematically cheated by financial giants.

The power of a tight group of insiders can also echo through the government in subtle ways. No one likes to ignore telephone calls from former colleagues, and no one likes to advance policies that could hurt future employers. Relationships matter, and anyone who doubts that Wall Street’s outsized influence in Washington has watered down our government’s approach toward still-too big-to-fail banks has their eyes deliberately closed.